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Acc 564 Assignment 4 - Changing The Accounting Information System

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Running head: AIS FAILURE 1
AIS Failure
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AIS FAILURE 2
Introduction
Migrating to a new accounting information system poses various challenges and can
manifest detrimental effects for corporations that are not able to handle the process with due
caution. Various factors can contribute to the failure of the accounting information system at the
design, implementation or operational phase of the process. One real life example of a company
whose accounting information system failed was the Oxford Health Plans Inc. The irregularities
and subsequent collapse of the AIS at Oxford took place between November 6, 1996 and
December 9, 1997. The company had recently migrated to a new system that proved problematic
to sustain beyond the design phase. Incorporating best practice could certainly have helped the
firm to uphold professional conduct and avert the collapse. This discussion explores the events
leading to the failure of the AIS at Oxford, the responsibility of management in the collapse, the
deficiencies at the design phase as well as highlighting the best practices and principles that can
mitigate against such collapses in future.
Background
Between January 1997 and September 1997, Oxford Health Plans Inc. erroneously stated
on its record and internal books aggregate revenues of $81 million (Securities and Exchange
Commission, 2002). During the first quarter of 1997, the overstatement amount was $3 million,
during the second quarter it was $25 million and in the third quarter, the overstatement amount
had jumped to $53, adding up to the total of $81 million of overstatement. This occurred
primarily because the company recorded in its current revenue accounts various items from its
unearned revenue account and its deferred revenue account. Because Oxford billed and in some
instances paid these “future” revenues before the relevant coverage periods, the company
recorded them well as liabilities (Sheehan & Goldner, 2007). However, Oxford did not perform

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AIS Failure Student's Name Institution Course Date Introduction Migrating to a new accounting information system poses various challenges and can manifest detrimental effects for corporations that are not able to handle the process with due caution. Various factors can contribute to the failure of the accounting information system at the design, implementation or operational phase of the process. One real life example of a company whose accounting information system failed was the Oxford Health Plans Inc. The irregularities and subsequent collapse of the AIS at Oxford took place between November 6, 1996 and December 9, 1997. The company had recently migrated to a new system that proved problematic to sustain beyond the design phase. Incorporating best practice could certainly have helped the firm to uphold professional conduct and avert the collapse. This discussion explores the events leading to the failure of the AIS at Oxford, the responsibility of management in the collapse, the deficiencies at the design phase as well as highlighting the best practices and principles that can mitigate against such collapses in future. Background Between January 1997 and September 1997, Oxford Health Plans Inc. erroneously stated on its record and internal books aggregate revenues of $81 million (Securities and Exchange Commission, 2002). During the first quarter of 1997, the overstatement amount was $3 million, during the second quarter it was $25 million and in the th ...
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